GDP is set to grow fairly strongly in 2017-18, supported by private consumption and investment. The labour market has started to improve. However, productivity gains are too low to sustain social protection, high-quality public services and rising incomes in the long run. Recent reforms have strengthened competition in some services sectors, but it remains weak in others. Along with high and complex taxes, this weighs on employment and productivity growth. Poverty is low overall. Yet, many youngsters and low-skilled workers are excluded from the labour market, especially when they live in poor neighbourhoods. Health-care quality is high, but insufficient support for prevention, a lack of coordination among providers and generous coverage of expenditures for most households result in excessive use and spending. A long-term strategy is needed to reduce public expenditure without endangering social protection so as to allow lower taxes with sustainable public finances. Increasing the focus on infrastructure and education spending for the poor would improve equity. This Survey also makes recommendations to foster an inclusive development of skills and employment that will lead to stronger productivity growth and higher living standards.

Thanks to a highly developed welfare state, poverty is moderate on average in France, but – as in other countries – highly concentrated in some neighbourhoods. Their residents face many social disadvantages, including high unemployment and inactivity, schools with many struggling children, often run-down housing and urban infrastructure, and a lack of local enterprises, services and amenities. The government focuses a wide array of policies on these areas to promote better schooling outcomes, employment and local economic activity. Urban renewal and public housing policies aim explicitly at promoting social mixing, often presented as an anti-ghetto policy. Evidence suggests that targeted investment in transport and housing infrastructure as well as education and training could go a long way to improving economic opportunities and well-being in poor areas. In contrast, special economic zones with tax breaks to attract business to these areas have a mixed track record at best. Greater social mixing is difficult to engineer, and it is far from clear if this by itself would improve the lives of the poor. There is a need to better link urban, social and judicial policies favouring alternative sentencing and support for offenders to integrate into society to avoid vicious circles of social disadvantage and crime.